Investing

Could Apple’s Stock Price Blast Past $300 in this iPhone Supercycle?

Eric Bleeker

Published: July 20, 2024 2:30 pm

Is Apple (Nasdaq: AAPL) headed to $300 per share in this iPhone supercycle? This week saw some upgrades that point toward that upside. Morgan Stanley issued a new price target on the company at $273 per share. In a bull case scenario, Morgan Stanley sees Apple shares climbing as high as $345 per share.

Then Loop Capital issued a $300 price target on Apple. How big does Apple’s upcoming iPhone supercycle have to be to drive these prices and what risks could stop the company from reaching these heights? We explore more below.

Need to Know Facts on Apple’s Supercycle

• New AI features are driving Apple’s upcoming iPhone supercycle. If you’re looking for more stocks benefitting from AI, make sure to grab a copy of our brand-new “The Next NVIDIA” report. It features 3 stocks, including an “AI Moonshot” stock with 10X returns potential.
• Morgan Stanley estimates Apple could sell 500 million iPhones during this next supercycle, which is 6% larger than Apple’s largest supercycle to date.
• Apple’s sales growth could reach 11% annually through 2026, which is a significant improvement from recent trends.

How High Could an iPhone Supercycle Drive Apple’s Share Price?

Below you’ll find the key highlights from the conversation between 24/7 Wall St. Analysts Eric Bleeker and Austin Smith.

• This week several Wall Street analysts put fresh price targets on Apple. Morgan Stanley raised its price target to $273, up from a prior level of $216.
• The reasoning behind this upgrade shouldn’t surprise any investors out there: it’s due to an AI-driven iPhone supercycle. The question is, how high can Apple shares go?
• We published an article on May 27th predicting Apple shares would rally through the summer. It was at $190 per share when we published that call, and as of this filming (Wednesday afternoon) Apple trades for $228. So the company has already seen quite a rally on enthusiasm from the ‘Apple Intelligence’ features it announced in June. 
• So, let’s dive deeper into JPMogan’s new $273 price target to see what’s baked into it. The most important estimate from JPMorgan is that Apple will sell 500 million iPhones across the next two years. This is 6% more than the previous largest iPhone supercycle Apple has seen.
• This level of iPhone sales would lead to about $8.70 in projected earnings power by fiscal 2026.
• Apple saw -4.3% sales growth last quarter, so this iPhone supercycle returning the company to sales growth is paramount. Overall, JPMorgan sees Apple generating 11% compounded annual sales growth between 2024 and 206.
• Running the numbers, today Apple is trading for about 26X JPMorgan’s 2026 earnings estimate ($8.70 per share). 
• The biggest question facing all large technology stocks today is what multiple investors are going to keep paying. Recently, Apple, Amazon, NVIDIA, and Microsoft have all traded in a fairly tight range of about 30X to 35X 2025 earnings.
• JPMorgan says their “bull case” for Apple is $349 per share – which relies on the upper bound of recent multiples. A best-case scenario could see Apple generating $9.82 in earnings per share in 2026, and a 35X multiple would get the company share price to $349.
• The big picture, it’s hard to see Apple crossing $300 per share in this supercycle unless its earnings multiple stays in a range of about 30X forward earnings.
• The complicating factor is that across the past week, the market has seen a big rotation into small caps. This rotation is pressuring the multiples investors are willing to pay for large tech companies.
• The root cause of this rotation is the Fed signaling rate cuts could start soon. Investors are betting that small cap stocks – which have badly underperformed large tech companies across the past 18 months – will have more to gain from the economy heating up after rate cuts.
• Yet, on the other side, lower rates will also help justify higher valuations. Apple trading at 30X earnings has an “earnings yield” of only about 3%. If the Treasury risk-free rate is 5% across the long run, its hard to justify such a low earnings yield.
• So, to sum it all up, it’s likely that Apple’s earnings growth across this supercycle will be strong enough to power its shares to $300. However, that’s only if investors continue paying 30X forward earnings or more for the stock.

What Stock Could Be “The Next NVIDIA?”

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Transcript:

Eric, this week, several Wall Street analysts put fresh price targets on Apple.

We had Morgan Stanley raising its price target up to $273, up from a prior level of $216.

So the reason shouldn’t surprise the investors out there, it’s due to an AI-driven iPhone super cycle.

My question is, right now, Apple trades around $230 a share as we film this video.

Now it’s gone on a bit of a run on some AI enthusiasm, but what I’m curious is how much is left in the tank?

And is it possible that this super cycle could drive the company up to $300 a share?

And just for context for investors, I mean, if we think about the iPhone super cycles of the past that made it the company it is today, I think about the iPhone 6, you know, famously the best-selling smartphone of all time.

And that really felt like a pivot point for the company where there was this massive supercycle and a convergence of new technology and features that made people drive by in mass, which then in many ways has carried Apple forward to being the company that it is today because you get the walk-in from all of those customers and you’re able to get additional revenue from the app store.

So these super cycles cannot be overstated in their importance for this company here.

And when you can drive one of these appropriately, you can lock in customers for the next decade on incremental cross-selling and iPhone upgrades.

So Eric, back to the point, could Apple hit $300 per share on this next iPhone 16 super cycle?

Yeah, it’s like you said, this is a super cycle.

In this case, it’s going to largely be driven by AI features.

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In our past, we published an article that was about Apple, where we predicted that it would go on a run through the summer because of this AI super cycle.

That was published May 27th, when Apple trained for about $190 per share.

Today, it’s up to $228 per share.

So on the margin, that call’s worked out very well.

The only question is, how much better could the call work out?

As you noted, the new price target from JP Morgan’s $273 per share.

Let’s unwind what’s baked into this.

The big number is 500 million iPhones across the next two years, which is their estimate, which is 6% higher than their previous super cycle.

In JP Morgan’s estimate, that would drive about $8.70 in earnings power by fiscal 2026.

So a couple of points here.

The first is that Wall Street is really lining up behind Apple, having a sustained period of return to revenue growth.

That’s great.

It’s going to be music to your ears if you’re an Apple investor because the number one concern is that they haven’t been able to grow revenue recently.

Forecasts from J.B. Morgan have been growing at an 11% compounded rate through 2026.

Now, let’s get back to that $8.70 earnings number.

If you take today’s price, Apple is trading about 26 times that fiscal 2026 estimate.

Austin, I’ve talked about time and time again here, but the huge question around big technology stocks is what multiple are they going to trade at?

We’ve had Apple, Amazon, Nvidia, and Microsoft all trading in a range of about 30 to 35 times next year’s earnings estimates.

JP Morgan, they put a bull case saying that Apple could reach $349 per share, but that would require a 35 times multiple on fiscal 2026 earnings of $9.82.

So Apple can keep its earnings multiple above 30.

That’s how it hits $300 per share.

So this is a long way of saying the big tech companies, they need to keep performing.

Apple needs to deliver strong growth across this super cycle, but equally important is whether the market wants to keep paying up for a 30 times forward earnings for these very large companies.

Because in the past week, we saw a lot of sector rotation to small caps.

That’s due to the Fed signaling that rate cuts are coming.

That’s taking a lot of funds and taking them out of indexes that Apple’s in, like the NASDAQ 100, and into small cap indexes.

But the other side, lower rates, is that it’s easier to justify a 30 times multiple because a 30 times multiple is inherently a three times earnings yield.

If a treasury is yielding 5% for a risk-free rate, it’s hard to hold at that level for the long run.

But if treasuries are going to a lower rate, it might support higher multiples.

So Austin, to sum it all up, I believe Apple will see strong enough earnings growth to go above $300 per share.

But again, that’s going to assume that the market wants to keep valuing at today’s multiple.

Bottom line, though, Apple, which has been struggling to grow, I think this super cycle is going to return it back to a period of compounded sales growth above 10%.

And that’s music to Apple investors’ ears.

Eric, thank you so much for shining a light on this.

I love your discussion of the upcoming super cycle and AI and the macro factors.

I did just want to close with one more reminder about that report you talked about, which is the next NVIDIA.com.

Our viewers can access it by going to the URL video.nextinvidia.com.

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And we’ve seen what AI can do for Apple shares, famously sending shares about 10% to 15% higher just on the news that they would be integrating AI into the iPhone 16.

No incremental sales data coming from it.

So just imagine what could happen when there are pure play AI companies out there.

And you’ve identified three in this report that are your favorite investments today.

So I just want to put that back on investors’ radar, video.nextinvidia.com.

Head there today and get three totally free stock picks.